Correlation Between Kaiser Aluminum and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and IPG Photonics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kaiser Aluminum and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and IPG Photonics, you can compare the effects of market volatilities on Kaiser Aluminum and IPG Photonics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kaiser Aluminum with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and IPG Photonics.
Diversification Opportunities for Kaiser Aluminum and IPG Photonics
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and IPG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Kaiser Aluminum is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kaiser Aluminum are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and IPG Photonics go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and IPG Photonics
Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the IPG Photonics. In addition to that, Kaiser Aluminum is 1.22 times more volatile than IPG Photonics. It trades about -0.03 of its total potential returns per unit of risk. IPG Photonics is currently generating about -0.03 per unit of volatility. If you would invest 8,710 in IPG Photonics on September 1, 2024 and sell it today you would lose (906.00) from holding IPG Photonics or give up 10.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. IPG Photonics
Performance |
| Timeline |
| Kaiser Aluminum |
| IPG Photonics |
Kaiser Aluminum and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and IPG Photonics
The main advantage of trading using opposite Kaiser Aluminum and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, IPG Photonics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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